Meloni asks EU for greater fiscal leeway due to rising energy prices

Italian Prime Minister Giorgia Meloni has asked Ursula von der Leyen, President of the European Commission, for more flexible application of the EU's fiscal rules. In a letter sent on October 1, she argued that the energy crisis is driving inflation higher than expected, increasing state spending and narrowing the room available to support households and businesses.

According to the Italian prime minister, inflation-linked obligations—such as increases in pensions and certain family benefits—do not stem from new government decisions, yet they still weigh on predetermined spending limits, since EU rules set nominal spending paths. As a result, higher-than-planned price increases can eat into part of the fiscal space even if the government introduces no new programs. Meloni proposes that the Commission take this automatic spending growth into account when applying the rules, and allow at least part of the extra tax revenue generated by inflation to be used for temporary, targeted energy support measures. She argues that higher prices boost, for example, VAT revenues, but current rules limit governments' ability to channel this surplus back into easing the burden on citizens and companies. She wants to discuss the issue at the finance ministers' meeting on October 9.

In its response, the European Commission stressed that it has already granted member states additional flexibility to manage energy-related expenditures. According to the body, the national escape clause, if the proper procedure is followed, allows deviation from the spending path, but this cannot override commitments on fiscal sustainability and budgetary discipline. Italy has already submitted a request to make use of this option, which the Commission is reviewing; in her reply, Meloni confirmed that Rome remains committed to debt sustainability and to meeting the obligations undertaken under the excessive deficit procedure against Italy.

Ugar